Bolshevik finance

The Soviet period provides a few clues on how to successfully industrialise and break from capitalism…

The need for a financial system that supports British national industrial development is becoming a regular topic of conversation throughout the country. How to run industry and finance without capitalism was one of the things the Bolsheviks learned how to do in the Soviet Union after the October Revolution, and we can learn something from studying how they did it.

At the core of the Bolshevik outlook was the view that the hoarding of money into capital as a store of value is simply an inefficient practice. So money took on a different role, as briefly outlined in the box overleaf.

The end of market rates

Private capital ceased to be an “instrument of production”, and market interest rates for the hire of it (in other words interest-bearing loans) were replaced by rates that served a completely different purpose. First, rates were set to help pay the operating expenses of the Soviet banking system. Secondly, they were applied to penalise industrial organisations that were inefficient in regulating their cash flow.

Bolshevik rates of interest were simply a means of supporting the cost of running an efficient financial administration. Another extremely important feature of Soviet currency was that it played no formal role in either Soviet exports or imports (international trade was carried out in Western currencies), thereby avoiding the impact of foreign currency speculation.

All of this meant that competition and anarchy of production, things we in Britain are all too familiar with, were replaced by a balanced and proportionate development of the national economy.

And with housing allocated on the basis of need, no one could buy a home. The housing market – one of the worst failures of modern British capitalism – simply did not exist.

Resistance

Of course the Bolsheviks encountered powerful resistance from the capitalist forces both inside and outside the Soviet Union. What also developed was a “unity of opposites” between the supporters of capital and “leftists” whose critique of the Soviet Union under Stalin was that it was state capitalism based on commodity production.

Opposition by capitalists was understandable: they were facing redundancy. But what “leftists” failed to recognise was that commodity production – production for exchange – in itself is older than capitalist production, making it possible for it to be modified. Actually, commodity production was confined to agricultural produce, which politically united the Soviet workers and peasantry.

ʻOf course the Bolsheviks encountered powerful resistance from the capitalist forces both inside and outside the Soviet Union.ʼ

Stalin simply posed the question like this: “Why then, one asks, cannot commodity production similarly serve our socialist society for a certain period?” The core point was that socialist adaptation could remove the cornerstone of bourgeois political economy, namely the ridiculous theory that the exploited cannot do without the exploiters.

With money no longer bundled as capital or traded, and with the abolition of the system of capitalist wage labour, the two biggest markets, namely the markets in capital and labour, were scrapped. In so doing the Soviets achieved an economic success between 1917 and 1953 that is yet to be surpassed. Some people talk glibly about a global slump in the 1930s. Not so. In Soviet Russia there was no slump, and no unemployment.

How is this useful to British workers today? Apart from dealing with the nonsense spoken about markets (“markets are the most efficient way”, and so on), what comes through loud and clear is the particular role currency plays both in planning and helping to keep a working class together as a national economy and as a society.

National currency

Although in a different context, it was the importance of a national currency that resonated in British workers’ minds when rejecting the euro. It was again present to help counter the SNP reactionaries during their recent attempt to break up Britain. A similar British working class national perspective (and more) should also apply when addressing the Westminster-inspired devolution and regionalism agenda, which embodies the same liberal mixture of reaction and political cowardice that underpins separatism.

While the Nazi attack on the USSR of 1941-45 was horrendous, paradoxically the most politically destructive moves came from within, starting with the Khrushchev economic reforms. These ran hand in hand with the gradualist “road to progress” adopted by many European labour movements from the mid-1950s onwards.

Have any of these post-1953 actions, including the latest dollop of regionalism, brought the British working class nearer to socialism, or on the contrary have they taken us further from it? Most workers would say it’s further.

Workers who for so long have taken it for granted that a capitalist market economy is the highest form of endeavour are beginning to feel uncomfortable. They may not be aware of the expression “Pull the donkey’s tail out of the mire and his nose will stick in it, pull out the nose and his tail will be in it,” quoted by Stalin when describing capitalism in November 1927, but a similar perception is beginning to take hold in many workers’ minds today.

Finally to those in the labour movement who advocate regionalism we would put one question: Where is your national plan for Britain? Answer: nowhere to be seen, because you don’t have one and instead hide behind regional break up as a pretend economic solution, whilst siding with the forces North and South who seek to politically divide the British working class.

• See companion article: Accounting for money in the Soviet Union